The P&L statement is one of the three most important financial statements for business owners, along with the balance sheet and the cash flow statement (or statement of cash flows). A profit and loss (P&L) statement is a type of financial statement covering a specific period and revealing a company’s revenues, costs, and expenses. Ultimately, it helps show whether a company is making a profit or losing money.
Read our article on free small business profit and loss templates to find additional resources and get the most out of your P&L statements. We’ve compiled a comprehensive list of profit and loss templates for small businesses. OneUp is an affordable, easy to use accounting software application well suited for sole proprietors, freelancers, and small business owners. Offered on the cloud, OneUp works on desktop systems, laptops, and all mobile devices. If gross profit is down, your course of action should be to increase sales. The bottom line of the profit and loss statement is your net earnings—the total profit for your business, taking into account all internal and external expenses.
Accounting method #2: Accrual method
Access and download collection of free Templates to help power your productivity and performance. If revenue is higher than your expenses, your company has a net profit. But if your expenses are more than your revenue, then your company has a net loss. Revenue can also include net revenue which is the gross revenue minus adjustments. As noted above, a P&L statement may be prepared in one of two ways.
- When you subtract COGS from your sales revenue, you get gross profit.
- After that, it’s appropriate to look into costs (COGS), like licensing, hosting, and customer support costs — all leading you to your gross profit.
- But it also allows you to identify where you can save or reduce spending.
Build and analyze a company’s financial statements in a real-world scenario with this free job simulation from JPMorgan. Practice analyzing company financial statements in this free job simulation from the NY Jobs CEO Council. The profit and loss statement is important because it tells you if your business is turning a profit. A hairstylist would have operating expenses like cosmetic supplies, insurance, and marketing. Non-operating expenses may include interest on business debt or writing off unsellable inventory.
Why a profit and loss statement is important
Startups and new businesses that do not have a financial history use a pro forma financial statement instead of a profit and loss statement. The pro forma is a projection of finances and is necessary when you are applying for business financial backing. In this example, since we are preparing a basic small business profit and loss statement, we will simplify the expenses by including the operating and non-operating expenses. A P&L statement shows investors and other interested parties the amount of a company’s profit or loss. Revenue and expenses are shown when they occur, not when the money actually moves into or out of the company’s bank account. The P&L statement is often the most sought after financial document because it shows whether a company is making money.
Simple Profit and Loss Statement Template
Before you start, you may want to calculate your expenses in one location using our free small business expense templates. Our tutorial breaks down the process of creating a profit and loss statement in Excel for small businesses into three easy steps, so you can get started using our customizable templates. Through careful P&L management, business leaders and finance professionals can make smart business choices to adjust spending on expenses and improve revenue. Financial analysts rely on P&L management to determine where they can cut costs, source opportunities to boost sales, and track profits.
Rental Property Profit and Loss Statement Template
Some companies choose to run one monthly, while others prefer quarterly profit and loss statements. Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance accounting profit formula templates and cheat sheets. Private companies, on the other hand, are not necessarily required to comply with GAAP. Some smaller companies, though, may even not prepare formal financial statements at all. Use our quick-reference guide below until you are familiar with the formulas.
How to Analyze a Profit and Loss Statement (P&L)
Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. For related financial templates, see our collection of free small business budget templates and expense templates. A balance sheet shows you how much you have (assets), how much you owe (liabilities), and how much is left over (equity). It’s a snapshot of your whole business as it stands at a specific point in time.
Is a P&L a cash flow statement?
This dollar amount is how much each investor will receive per their number of shares in the business. Together, alongside the cash flow statement (CFS) and balance sheet (B/S), the P&L statement provides a detailed depiction of the financial state of a company. Revenue is the money your business makes from selling goods or services.
View monthly and annual financial data with this construction profit and loss spreadsheet. Enter your monthly revenue for each client or project and list job costs such as labor, materials, equipment rentals, and dump fees. Add overhead expenses, from advertising and professional memberships to vehicle costs and small tool purchases. This template automatically calculates monthly totals and clearly displays profit and loss information for easy reference. It is important to compare income statements from different accounting periods. The reason behind this is that any changes in revenues, operating costs, research and development (R&D) spending, and net earnings over time are more meaningful than the numbers themselves.
